CHAPTER FIVE

Construction Contents
Equipment's Equipment Management In Construction Projects
 Use of Machines V/S Use of Manual Labour

Management Forecasting Equipment Requirement

Purchase of Equipment
Spare Parts Management
Maintenance Management

Equipment Costs
Owning Costs
Operating Costs

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 5.1 EQUIPMENT MANAGEMENT
The efficient and effective implementation of construction projects requires
good management of relationships for and among resources, activities and
stakeholders as applied to the context where such projects are implemented.
On most construction jobs, a combination of manual labor and machines is
employed.
Machinery can make up to 10-30% of the project cost, so it is an important
area to consider.
A contractor does not pay for construction equipment; the equipment must pay
for itself by earning for the contractor more money than it costs.
Unless it can be established in advance that a unit of equipment will earn
more than the cost, it should not be purchased.
For example a project under consideration is not large enough to justify the
purchase, because the cost cannot be recovered before the completion of the
project, and it may not be possible to dispose of the equipment at the completion
of the project at a reasonable price. 2
 5.1 EQUIPMENT MANAGEMENT
Use of Machines V/S Use of Manual Labour
Advantages of Machine Advantage of Manual Labour
1. It can handle tough works which cannot be 1. Initial heavy investments are not required to be
performed by manual labour. made.
2. It is cheaper when quantum of work is more and 2. Valuable foreign exchange is saved by employing
material is required to be transported for long
exchange is saved by employing manual labour
distances.
3. Machines when used in the project, it delivers
instead of using machines which are to be imported.
better quality of work. 3. Small and short duration projects are sometimes
4. It is possible to adhere to schedules. found to be economical with manual labour.
5. It is easy to predict the behaviour of a machine as 4. Direct advantage to considerably large number of
compared to that of man, hence planning is easy. people by way of employment which help in social
6. Being lesser number of persons, (operators only), and economic betterment.
it is easy to supervise and control. 5. No problem due to delay in procurement of spares
7. It helps in development of technical knowhow,
for the repair of machines. The delay (lead time) is
skill and industrial development of the country.
8. Availability of Manpower and seasonal
substantially high in case of imported equipments.
fluctuations will not affect the project’s progress. 6. Project can be started immediately, which is not
9. Effect of climate and topographic conditions is less possible in case machines are used. Since
when machines are used as compared to that importation, shipment, transportation installation and
when manual labour is used. commissioning of equipments require a substantial
10. No problem for housing and transportation of time. 3
persons and also for the arrangement for supply 7. Disposal of equipment and its balance spare parts
5.1 EQUIPMENT MANAGEMENT
Forecasting Equipment Requirement
There are certain type of works where man cannot work and only alternative is to use
construction equipment's e.g. earth work compaction, construction of bridges,
working under water, concreting, dewatering, construction of bituminous/rigid
pavements, working steep slopes etc.
Following are the main points planner has to decide in equipment planning.
a. Working Shifts: By increasing the number of shifts we can reduce the number of
equipment required, as the same equipment can be used in second and third shift
This helps in reduction in initial investment of capital.
Since repair facility for the break downs occurred in the night shift is not fully
available, provisions for standby equipment are desired.
(i) For equipment's used in single shift 10% standby
(ii) For equipment's used in double shifts 20% standby
(iii) For equipment's used in triple shifts 30% standby
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5.1 EQUIPMENT MANAGEMENT
Forecasting Equipment Requirement
b. Number and Size of Equipments- depends on : Quantity of work, Working days
available for completion of project & Number of shifts planned.
c. Matching Units: There are certain equipments, which are used together in
a team with other equipments, like scraper with pusher Dozer
d. Procurement Scheduling: Procurement scheduling is done considering
procurement time required and time when equipment is required.
e. Workshop and Stores Planning: - for repair and maintenance
f. Man power planning: Planning for manpower in order to operate the
equipment
g. Site Conditions: for deciding the type of equipment

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5.1 EQUIPMENT MANAGEMENT
Manpower Planning
To achieve maximum production at lower cost and at desired quality,
right man at right place at right job and at right time must be put.
This is what is called scientific assessment of manpower planning.
This reduces idle hours, cost of production and helps to set up the
moral of employees.
Manpower planning involves two stages.
The first stage is concerned with detailed planning of manpower requirement
for all types and levels of employees throughout the period of the plan and
The second stage is concerned with the right type of people from all sources to
meet the planned requirements.

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5.1 EQUIPMENT MANAGEMENT
Manpower Planning
Following are the essential requirements for a sound manpower planning:
1. It should be done sufficiently in advance.
2. It should be reviewed periodically, so that modifications or alternations
if any can be incorporated.
3. The planning should have top management support.
4. It should be need based.
5. It should be economic in nature.
6. It should incorporate the elements of flexibility and elasticity.
7. It should provide a suitable policy

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5.1 EQUIPMENT MANAGEMENT
Manpower Planning
For an effective and efficient manpower planning following main factors should
be considered:
(a) Working Hours-Manpower requirement is directly related to the total hours
worked per day by the employee in a project.
(b) Number of shifts- It has been experienced that production falls in the night
shifts as compared with day shifts.
(c) Nature of work- includes adverse weather, climatic conditions, topography,
toughness etc
(d) Operators Efficiency-Normally following standard is considered as
guidelines for measuring workers efficiency:
(i) Operators having one year of job experience = 85%
(ii) Newly appointed operators after training = 60%
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5.1 EQUIPMENT MANAGEMENT
Purchase of Equipment
The selected model and type is issued considering lead time for the supply
of equipment, time required for its installation and commissioning, and the
time when equipment should be available for use.
Generally fast moving or maintenance spares are purchased along with the
equipment especially for a period of one or two years.
Equipments should be purchased in phases, so that the money is not blocked
and equipments required later do not remain idle.

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5.1 EQUIPMENT MANAGEMENT
Spare Parts Management
Some of these techniques are mentioned below which can be used either in
dependently or jointly
[Link] Title of Technique Basic Application
1 ABC (Always Better Control) Annual Consumption Inventory control.
value in Birr
2 HML (High, Medium, Low) Unit price of Material Delegation of purchase
powers.
3 VED (Vital, Essential, Desirable) Operational Storage point.
Characteristics
4 FSN (Fast, Slow, Non-moving) Issues form Stores Obsolescence control.
5 SDE (Scarce, Difficult, Easy) Availability of items Purchase strategy
6 FAN (Failure Analysis) Design of issue of Reliability Engineering
spares
7 GOLF (Govt. Ordinary, Local, Source of origin of Purchase strategy
Foreign material
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5.1 EQUIPMENT MANAGEMENT
Maintenance Management
Following are the types of maintenances:
a) Repair Maintenance can be followed for non-critical equipments, and
where failures are unpredicted.
b) Corrective Maintenance should be adopted for frequently falling
components.
c) Preventive Maintenance
Periodic inspection or checking at the pre-decided frequency helps to find
out the reasons leading to breakdown and to rectify them when they are in
minor (or initial) stages.

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5.1 EQUIPMENT MANAGEMENT
Maintenance Management
Following are some of the important functions of the preventive
maintenance programme:
(i) Inspection or check-ups at carefully decided frequencies.
(ii)Lubrication- application of right type of lubricant at the right time, at the
right place and in right quantity.
(iii)Every preventive maintenance work should be pre-planned.
(iv)Good record keeping is essential for good preventive maintenance.
(v)Training of maintenance personnel.
(vi)Storage of maintenance spares.

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5.1 EQUIPMENT MANAGEMENT
Construction Management ‐ Construction Mangers are provided with resources
such as labor, equipment, and materials and are expected to build a facility
within the allocated budget, time and required quality.
􀂅 A strong performance across the board is required.
􀂅 Equipment resources play a major role in any construction activity and thus an
access to such resources will be vital.
􀂅 There are three basic ways of securing construction equipments. These are
Buying (Direct Ownership), Renting or Leasing.
 Direct Ownership
􀂆 Direct Ownership has the advantage of guarantying use and control of
equipment when ever demanded but requires continuity of work for it to
payback its cost because such equipments are very expensive.
􀂆 Beside, their maintenance services require adequate attention. If a
construction company foresees the use of construction equipment continuously
direct ownership will bring down its competitive cost of bidding continuously, to
increase the chance of acquiring/winning projects. 13
5.1 EQUIPMENT MANAGEMENT
Rental Services
􀂆 Rental Services are short term provisions of construction equipments from
renting organizations for the purpose at hand.
􀂆 This is particularly advantageous if the job is of short duration and a
construction company do not foresees continuity of similar works.
􀂆 Companies can also use rental services for testing and selecting construction
equipments before direct ownership.
􀂆 Rental charges are higher than normal direct ownership expenses. Besides,
there could be shortage during peak work seasons. Responsibility for
maintenance is usually indicated in the rental contract.
 Lease
􀂆 Lease is a long term agreement for the use of an asset.
􀂆 Lease rates are applied mainly to recover the capital costs of the equipment for
its periodic replacement plus overhead and profit if servicing of equipment lies on
the lessee partner.
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5.2 EQUIPMENT COSTS
Principles and techniques of engineering economics are utilized while making equipment selection
and planning of finances for the purchase of construction equipments.
Hourly Working Rate Hourly working rate of construction equipment comprises of the following
component:
(i) Owning Cost. It is made up of the following costs:
(a) Investment cost,
(b) Depreciation cost,
(c) Major repair cost.
(ii) Operating Costs. It includes the following cost:
(a) Cost of fuel (or power),
(b) Cost of lubricant,
(c) Servicing and maintenance cost,
(d) Labor cost,
(e) Cost of field repairs,
(f) Various other overheads.
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5.2 EQUIPMENT COSTS
I. Owing Costs
a. Investment Costs - Investment costs comprises of the following:
(a) Interest on the money invested in the procurement of the equipment.-
 The rate of interest should be equal to the prevailing bank rates .

(b) Various taxes on the equipment.

 are those paid by the owner for the equipment.

(c) Insurance expenses.

 in order to cover the risk of the equipment and any other loss caused due to any
accident by the equipment.
(d) Storage costs.
 is the cost of space required by the equipment and other expenses to be incurred by
the owner for keeping the equipment.
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5.2 EQUIPMENT COSTS
I. Owing Costs
a. Investment Costs -Generally these investment costs are taken as about 10 to 15% of the total
cost of the equipment.
This total cost comprises of the following:
(a) F.O.B. Price of the equipment with all attachments and accessories.
(b) Insurance and freight charges.
(c) Expenses on un-loading, clearance and custom duty.
(d) Cost of transportation to the job site including loading and unloading.
(e) Erection and commissioning charges.

F.O.B- FREE ON BOARD- A trade term requiring the seller to deliver goods on board a vessel
designated by the buyer.

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5.2 EQUIPMENT COSTS
I. Owing Costs
b. Depreciation-Due to use and obsolescence every equipment
loses its value.
This loss is accounted for by depreciating the equipment every
year.
Efficiency and value of machine of asset constantly reduces with
the lapse of time during use, which is known as “depreciation”
Obsolescence- is the depreciation of existing machinery or asset
due to new and better invention, design of equipment of processes
etc.

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5.2 EQUIPMENT COSTS
I. Owing Costs
b. Depreciation
For further understanding depreciation can be classified as under:

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5.2 EQUIPMENT COSTS
I. Owing Costs
b. Depreciation
Methods of Calculation:
The following are the methods for calculating depreciation .
1. Straight line Methods
2. Diminishing Balance Method
3. Sinking fund Method
4. Annuity Charging method
5. The Insurance policy method
6. The Revaluation or Regular Valuation method
7. Machine Hour Basis method

8. The sum of the year’s Digits method

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5.2 EQUIPMENT COSTS
I. Owing Costs
b. Depreciation
i. Straight line Methods- This method assumes that the loss of value of machine is directly
proportional to its age

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5.2 EQUIPMENT COSTS
I. Owing Costs
b. Depreciation
i. Straight line Methods- This method assumes that the loss of value of machine is directly
proportional to its age

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5.2 EQUIPMENT COSTS
I. Owing Costs
b. Depreciation
ii. Diminishing Balance Method- The diminishing value of machine is greater in the early
years.
 It depreciates rapidly in the early and later-on slowly.
 Therefore, it is better to depreciate more during the early years, when the repair
and renewals are not costly.
 The book value of the machine goes on decreasing as its existence continues, A
certain percentage of the current book value is taken as depreciation.
 Therefore, this is also called “percentage on Book Value” method.

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5.2 EQUIPMENT COSTS
I. Owing Costs
b. Depreciation
ii. Diminishing Balance Method-
In this, let x be the fixed percentage taken to calculate the yearly depreciation
on the book value.

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5.2 EQUIPMENT COSTS
I. Owing Costs
c. Major Repair Cost
Major repairs and over hauls are the replacement of major parts of the
equipment because of the excessive wear through a long period of use.
The major repair cost is spread out during the entire life span of the
equipment and a flat rate is levied per working hour in order to have a
uniform rate.
Usual practice is to consider this major repair cost as a percentage of
straight line depreciation cost and is generally taken as 80 to 200% of the cost
of depreciation depending on the type of equipments.

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5.2 EQUIPMENT COSTS
II. Operating Costs
a. Cost of fuel
The actual consumption of fuel or electricity in these construction equipments depends upon:

i) Engine Boiler Horse Power (B.H.P)

ii) The load factor, which means the extent to which the engine will operate at full power.
Load factor generally vary from 30% to 70%.

iii) The conditions of the engine Optimum fuel consumption in litters per hour may be
calculated using following formula:

Fuel consumption = 0.27 x load factor.

During the balance part of its cycle the demand on the engine will be reduced substantially,
resulting in decreased consumption of fuel.

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5.2 EQUIPMENT COSTS
II. Operating Costs
a. Cost of fuel
load factor (C) may be taken as follows as recommended by the
“construction plant and machinery committee – 1972.

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5.2 EQUIPMENT COSTS
II. Operating Costs
b. Cost of Lubricants - Lubricants include the following:
i) Engine oil
ii) Air filter oil
iii) Transmission oil
iv) Hydraulic oil
v) Greases etc.

The quantity of lubricating oil depends upon various factors. Some of these factors are:

i) Capacity of the crank case

ii) Condition of piston rings
iii) Number of hours between oil changes.

 This depends on the operating conditions and the manufactures recommendations. In extreme dusty
conditions oil is required to be changed after every 50 hours of working, while in normal conditions it
may vary from 100 hours to 200 hours.
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5.2 EQUIPMENT COSTS
II. Operating Costs
B. Cost of Lubricants - Following formula is used for estimating the quantity of oil
required per hour:

 The term 0.006 lb/hp-h in the above equation is based on the assumption that the quantity of
lubricating oil required per rated horsepower hour between the changes is 0.006 lb and 7.4 lb/gal is the
conversion factor
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5.2 EQUIPMENT COSTS
II. Operating Costs
C. Servicing and Maintenance Cost - This cost includes:
i) Change of lubricants
ii) Checking and servicing of fuel and lubricating systems, including change
of filter elements.
iii)Care of tyres and tubes
iv) Care of Battery and electrical system

v) Cleaning of the equipment and other similar works.

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5.2 EQUIPMENT COSTS
II. Operating Costs
C. Labour Cost

Labour cost element includes the salaries of operators, and helpers engage on the equipment.

A percentage of the wages of supervisory staff, depending upon the attention required on
that particular equipment, is also to be added.

D. Cost of Field Repairs

This is the cost incurred on minor repairs which are carried out on the site or in field
workshops.

These repairs include replacement of minor parts, such as fan belts, filters, bearings, wire
ropes etc. and other adjustments required to be carried out during normal working of the
equipment.
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5.2 EQUIPMENT COSTS
II. Operating Costs
E. Overheads

 These are the charges which are incurred on complete fleet of the equipment.

 These charges includes the pay on watchman, light and water charges in the storage yards,
uniform to the operating and maintenance staff etc.

Repair Reserve Fund - A provision for the repair of an equipment for its entire life is made by charging
a percentage of the book value (excluding the value of tyre).

Crawler tractor/Dozer............................................................................................... 240

Wheeled tractor/Dozer .............................................................................................. 200

Shovels/Draglines, hyd. Excavators, vibratory compactors, wheeled loaders…….150 e.t.c.

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5.2 EQUIPMENT COSTS
Replacement Analysis
Replacement analysis is carried out when there is a need to replace or
augment the currently owned equipment (or any asset).
One of the reasons is the reduction in the productivity of currently owned
equipment.
Another reason for replacement of the existing equipment is obsolescence.

In replacement analysis, the existing (i.e. currently owned) asset is referred as
defender whereas the new alternatives are referred as challengers.
The current market value represents the opportunity cost of keeping the
defender i.e. if the defender is selected to continue in the service.
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 THE END

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FUTURE!!!

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